Board of Directors

Vicarious Liability

I last wrote that C-Suite executives are responsible and accountable for the internal fraud that hits almost every company, especially when apathy and a lack of oversight is determined to be the reason for the failure to detect and prevent the fraud. There is another group that equally shares the responsibility for the failure - the Board of Directors.

While the ultimate responsibility is prosecuted onto the criminal, vicarious liability is normally assigned in civil court to the C-Suite and to the Board of Directors. The Board needs to ask themselves the same types of questions asked of the executives:

Have you made excuses for and legitimized that charismatic CEO, the one the Board would never think was fudging the numbers with Financial Statement Fraud?

What about the COO you suspect is involved in Insider Trading but no one has asked the pertinent questions?

When was the last time you called for an unscheduled audit of any aspect of the operations? 

Flex those fiduciary muscles on behalf of the shareholders, you’re justified in calling for a full fraud audit or even targeted audits of specific aspects of the corporation.

Brought to you by your independent Certified Fraud Examiners at Fittz & Associates.